Troubled Times Continue For Coinbase: Exchange Slammed With A $5M Lawsuit

The cryptocurrency exchange platform Coinbase has been facing tumultuous times recently. It hasn’t been able to successfully deal with the previous allegations and probes but continues to be pelted with new ones. Recently, it has been hit with a number of lawsuits from resentful customers.

Most recently, a Coinbase customer has sued the exchange for $5 million in the charges of failing to properly secure customers’ accounts and “flouting” federal securities laws, among some other charges. The lawsuit was filed in a federal court in Georgia. 

Coinbase Hit with a $5M Security Lapse Case

The putative lawsuit was filed last week on behalf of more than 100 customers. The case alleges that the biggest American crypto exchange locked users out of their accounts for long periods of time, which caused them financial setbacks.

The case was filed in the U.S. District Court for the Northern District of Georgia. In the filing, Plaintiff George Kattula alleges that Coinbase doesn’t disclose that the crypto assets on its platform are securities, which “boldly flouts federal and state laws.”

The lawsuit states, “Contrary to its representations, Coinbase does not properly employ standard practices to keep consumers’ accounts secure. Coinbase improperly and unreasonably locks out its consumers from accessing their accounts and funds, either for extended periods of time or permanently.”

The plaintiffs argue that the crypto exchange crashed during times of market volatility, which makes it hard for user to withdraw their cash. The user lawsuit also alleges that ‘the plaintiff’s assets were vulnerable to theft.’

“We are aware of a large number of fraudulent transactions in the accounts of Coinbase customers. We are encouraging all Coinbase account holders to review their accounts carefully and advise us promptly of any irregular activity,” said John Herman of Herman Jones LLC, the Georgia-based law firm representing Kattula.

The lawsuit also mentions earlier issues, such as a 2019 incident in which the exchange reportedly took over six months to let a customer back into their own account. This is one pattern the suit alleges that the company has repeated multiple times.

“Coinbase’s user growth has outpaced its ability to provide the account services and protections it promises to consumers,” the recent complaint said.

The suit alleges “Coinbase failed to establish and maintain adequate cybersecurity measures which caused investors to lose their wallet and account access, the assets and investments in those accounts as well as sensitive personally identifiable information stored in their Coinbase accounts, and, among other things, their investment opportunities.”

Kattula’s lawsuit is seeking damages worth more than $5 million (which excludes his legal costs and fees), a binding judgment, and injunctive relief, which is an order to prohibit involved parties from carrying out certain activities.

A Bad Year For Coinbase

This isn’t the only lawsuit against U.S’s largest cryptocurrency exchange. 

Coinbase has also been facing a series of lawsuits from disappointed investors. Earlier this month, a shareholder accused the company of misleading investors about last year’s public listing.

The exchange platform has also been trying to settle two separate lawsuits filed by investors and is pleading for the cases to be sent into arbitration.

Notably, the SEC is currently investigating the company for allowing US residents to trade unregistered securities, as per a report of late July.

The exchange also saw civil and federal charges filed against a former Coinbase product manager, who was accused of running an insider trading scheme. The complaint against the former Coinbase employee alleged that the exchange currently lists several unregistered securities.